Process Analysis and

Resource Utilization
PGDM 2023-25: Term I
Operations Management (OPM 101)

Sessions # 9, 10, 11

“Ups and downs in life are very important to keep us going, because a straight line even in an ECG
means we are not alive.“
- Ratan Tata
8/28/2023 Prof Kalyana C Chejarla
 Learning Objectives

1. Describe how to compute resource utilization and use the

equations for practical applications.
2. Be able to identify process bottlenecks and calculate
throughput.
3. Explain how to apply Little’s Law to process analyses.
4. Explain the principles and logic of the theory of
constraints

8/28/2023 Prof Kalyana C Chejarla Collier

 Shirt Manufacturing Process Flow Chart
WIP
Inventory of Cloth
Inventory
& Other materials
Sleeves &
collar
Design stitching
Spreading Choice Cutting
Torso stitching

Assembly,
Pressing & buttons &
Inspection other
material

Inventory of
Shirts

8/28/2023 Prof Kalyana C Chejarla Mahadevan

 Basic Process Vocabulary
• Inventory: The number of flow units in the system

• Activity times: how long does the worker / resource spend on the task?

• Capacity= {1/activity time}: how many units can the worker / resource make per unit of
time
o If there are ‘m’ workers / resources at the activity: Capacity={m/activity time}

• Bottleneck: process step with the lowest capacity

• Process capacity: capacity of the bottleneck = Minimum {Capacityi}

• Flow rate =Minimum {Demand rate, Process Capacity}

• Utilization =Flow Rate / Capacity

• Flow Time: The amount of time it takes a flow unit to go through the process

8/28/2023 Prof Kalyana C Chejarla Cachon & Terwiesch

 Resource Utilization
• Is the fraction of time a workstation or individual is busy over the
long run.
• It is difficult to achieve 100% utilization.
• Most job shops range from 60-95% with most continuous flow
processes above 95%.

8/28/2023 Prof Kalyana C Chejarla Collier

 Little’s Law
• At any moment, people, orders, jobs, documents, money, and
other entities that flow through processes are in various stages of
completion and may be waiting in queues.
• Flow time (cycle time):
• is the average time it takes to complete one cycle of a process.
• Little’s Law:
• is a simple equation that explains the relationship among flow time (T),
throughput (R), and work-in-process (WIP)
• Formula for Little’s Law:
• Work-in-process = Throughput x Flow time
• Can be expressed as WIP = R x T

8/28/2023 Prof Kalyana C Chejarla Collier

 Managing Waiting Lines

• A queue is a waiting line.

• Understanding queues allows us to analyze current and alternative
process designs to understand their behavior, predict process
performance, and better allocate resources.
• Queueing models help managers understand key performance
measures such as waiting times, queue lengths, and machine or
server idle times so that they can manage resources more
effectively and provide better customer satisfaction.

8/28/2023 Prof Kalyana C Chejarla Collier

 Little’s Law Example
Car Batteries
• Suppose, a car manufacturer has a JIT agreement with Battery Supplier to supply a
shift’s supply at beginning of every day

• Cost per battery = $45

• Time to make a car = 12 hours (Flow time)

• Assembles 200 cars per 8-hour day

• Throughput Rate = 200/8 = 25 cars / hour (i.e, use 25 batteries per hour)

• Using Little’s Law; WIP = Throughput x Flow Time

• WIP = 25 batteries / hour x 12 hours / unit = 300 batteries
• Value = 300 x $45 = $13,500

8/28/2023 Prof Kalyana C Chejarla Chase

 Little’s Law
More Examples
• Material Flow: The Jumbo King restaurant processes an average of 5,000 Kg. of potato (for vada-pav) per
week. The typical inventory of raw potato is 2,500 kg. What is the average vada-pav’s flow time of the
restaurant?
λ (arrival rate) = 5000 Kg / Wk,
L (Length of queue) = 2500 Kg,
W (Flow time) = L/ λ = (2500 Kg) / (5000 Kg/Wk) = 0.5 week
• Customer Flow: The above restaurant processes on average 1,500 customers per day (15 hours). On
average there are 75 customers in the restaurant (waiting to place the order, waiting for the order to arrive,
eating etc.). How long does an average customer spend at the restaurant and what is the average customer
turnover?
λ (arrival rate) = 1500 customers per day i.e. 100 customers per hour,
L (Length of queue) = 75 customers,
W (Flow time) = L/ λ = (75 customers)/(100 customers per hour) = ¾ hr
• Job Flow: Shamshabad branch office of the New India insurance company processes 10,000 claims per year.
The average processing time is 3 weeks. Assuming 50 weeks in a year, what is the average number of
claims “in process”.
λ (arrival rate) = 10000 claims /year,
W (Flow time) = (3 weeks )/(50 weeks /year),
L (Length) = λ * W = (10000 claims per year)* (3/50 years) = 600 claims
8/28/2023 Prof Kalyana C Chejarla
 Process Analysis Example#1
Toy Manufacturing

5. Inspect &
1. Prepare 2. Pre-treat 3. Paint 4. Dry
Pack
8 minutes 12 minutes 20 minutes 10 minutes
5 minutes

• Flow Unit = Pallets containing 4 Toys each

• The flow time for the process is 55 minutes (8+12+20+10+5)
• The spray painting is the bottleneck in the process
• There is ample open area in which the pallets are left for drying (Step#4)
• Cycle time is 20 minutes/pallet. The implication of this is that when the process
operates in a continuous manner, a pallet of finished toys come out every 20
minutes.

8/28/2023 Prof Kalyana C Chejarla Mahadevan

 A graphical representation with start and end times

Every batch of four toys come out exactly in an interval of 20 minutes which is the cycle time for the process

8/28/2023 Prof Kalyana C Chejarla Mahadevan

 Production Capacity of the system

Inspect &
Prepare Pre-treat Paint Dry
Pack
7.5 pallets/hr 5 pallets/hr 3 pallets/hr ???
12 pallets/hr

Util: 40% Util: 60% Util: 100% Util: NA Util: 25%

• The system can produce at the rate of 3 pallets per hour (12 toys)
• For a 8 hour operation the daily production is 24 pallets (96 toys)
• Capacity is unbalanced across different stages of the process
• Utilization of each process = ?

8/28/2023 Prof Kalyana C Chejarla Mahadevan

 Practice Problem
What is the capacity of this hot dog counter?

• 2 grinders 1. Grind 6. Inspection • 17 inspectors

• 22,000 dogs per trimmings • Each inspector requires
batch 1/6th of a second
• 5 minutes to load to inspect each dog
and grind
• 6 mixers 2. Mix 5. Peeler • 8 peelers
• 22,000 dogs per ingredients • 700 dogs per minute
batch per peeler
• 1/3 hour to mix

• 3 machines 3. Stuffing 4. Cook • 5 ovens

• 2,300 dogs per and flavor • Each oven holds
minute per 15,000 dogs
machine • Each dog spends
15 minutes in process
8/28/2023 Prof Kalyana C Chejarla Cachon & Terwiesch
 Process Analysis Example # 2
Joe’s commercial Laundry has contracts to wash bed sheets for hotels. Joe intakes each batch of
sheets, which takes 1 minute, then the sheets are washed taking 20 minutes and dried taking 30
minutes. The batch of sheets is ironed taking 10 minutes for each batch and there are two
employees ironing sheets. Finally, Joe packages the sheets and bills the customer, taking two
minutes. Joe has five washing machines and seven dryers that can each process one batch of
sheets.
a. What is the capacity of the laundry system and what is the bottleneck?
b. What is the average flow time of a batch of sheets?
c. If the throughput rate is 10 batches per hour, what is the average number of batches of sheets in the system
(Inventory)?

Capacity (in terms of batches / hour) of Laundry System =Min {[60/(1+2){Joe}], [(60/20)*5 {Washing}],
[{(60/30)*7 {Drying}], [(60/10)*2{Ironing}]}
=Min {20, 15, 14, 12} = 12 Batches / Hour
Bottleneck= Ironing
Flow Time= 1+20+30+10+2 = 63 min =63/60 hrs
WIP = Throughput rate* Flow time = {(10 batches/hour)(63/60 hrs)}= 10.5 batches of sheets

8/28/2023 Prof Kalyana C Chejarla

 Effect of Setup Time on Capacity
Given:
- Prepare stage (max 3 pallets) ~ Break-up of 8 minutes
o Set-up (onetime) = 4 minutes and
o Processing time (Pallet Loading time) = 4 minutes per batch
- The Pre-treat and Inspect & Pack stages can accommodate only one batch at a
time
- The painting booth can hold up to 3 pallets during spraying
o Painting can happen for 1, 2 or 3 pallets at a time
- There are enough pallets in the system
- The only resource needed for drying is space, which is amply available

8/28/2023 Prof Kalyana C Chejarla Mahadevan

 Production Capacity under varying batch sizes
Existing Scenario: Batch Size of the Process = 1 pallet

Inspect &
Prepare Pre-treat Paint
Pack
(8 minutes) (12 minutes) (20 minutes) Dry
(5 minutes)
7.5 pallets/hr 5 pallets/hr 3 pallets/hr
12 pallets/hr

Scenario 1: Batch Size of the Process = 2 pallets

Prepare Inspect &

Pre-treat Paint
(4+ (2*4) = Pack
(12 minutes) (20 minutes) Dry
12 minutes) (5 minutes)
5 pallets/hr 9 pallets/hr
10 pallets/hr 12 pallets/hr
Scenario 2: Batch Size of the Process = 3 pallets
Note that this
Inspect & increase in
Prepare Pre-treat Paint capacity is nothing
(4+ (3*4) = Pack
(12 minutes) (20 minutes) Dry to do with setup;
16 minutes) (5 minutes) just new
11.25 pallets/hr 5 pallets/hr 9 pallets/hr
12 pallets/hr information!!

8/28/2023 Prof Kalyana C Chejarla Mahadevan

 Capacity increases as the batch size increases
Batch size
Capacity =
Setup time + Batch size  Processing time

• As the batch size increases, Prepare: Capacity (per hour)

the setup time is amortized 16

over more units, thereby 14

increasing the process’ 12

capacity 10

• The process capacity can 4

never be more than 1 / 2

Procesing time 0

(That is the capacity with an 0 2 4 6 8 10 12

infinite batch size.)

Capacity (per hour)

8/28/2023 Prof Kalyana C Chejarla Cachon & Terwiesch

 Effect of Resource Availability on Capacity
Scenario 1: Batch Size of the Process = 1 pallet, 3 at painting booth

Inspect &
Prepare Pre-treat Paint
Pack
(8 minutes) (12 minutes) (20 minutes) Dry
(5 minutes)
7.5 pallets/hr 5 pallets/hr 9 pallets/hr
12 pallets/hr

Scenario 3: Batch Size of the Process = 3 pallets, 2 pre-treatment units

Pre-treat
(12 minutes)
Prepare 5 pallets/hr Inspect &
Paint
(4+ (3*4) = Pack
(20 minutes) Dry
16 minutes) (5 minutes)
11.25 pallets/hr Pre-treat 9 pallets/hr
12 pallets/hr
(12 minutes)
5 pallets/hr

8/28/2023 Prof Kalyana C Chejarla Mahadevan

 Process Analysis
Practice (Homework)
• A product is manufactured in a shop using a five-stage process. The first step in the process is to cut the sheet
metal to required shapes and sizes using a shearing process. After the shearing process, the components are
subjected to pressing operations to alter the shape of the flat sheet as per the design. In the third stage of the
process welding is done to join the components. The next step in the process is a painting operation. After
painting, the components are packed and kept ready for dispatch. The time take for each of these operations
are 20, 30, 15, 12 and 6 minutes respectively. Presently, each stage has only one machine for operation.

Packing
Shearing Pressing Welding Painting
(6
(20 minutes) (30 minutes) (15 minutes) (12 minutes)
minutes)

• Map the process and analyze the capacity with respect to the following scenarios:
• If the shop works for an 8-hour shift with an effective available time of 450 minutes, what is the production capacity
of the shop?
• Where is the bottleneck in the system? If we want to add one machine, where should we make the investment?
• Identify the additional capacity required for a daily production target of 25 units. Compute the utilization of the
machines as per the revised capacity calculations.

8/28/2023 Prof Kalyana C Chejarla Mahadevan

A few process configurations
 Rework
• Many processes include control or inspection points where if the job
does not conform it will be sent back for rework
• The rework will directly affect the average flow time!
• Definitions
• T = sum of activity times in the rework loop
• r = percentage of jobs requiring rework (rejection rate)
• Assuming a job is never reworked more than once
FT = (1+r)T

• Assuming a reworked job is no different than a regular job

FT = T/(1-r)

8/28/2023 Prof Kalyana C Chejarla Laguna et al.

 Rework - Example
• Consider a process consisting of
• Three activities, A, B & C taking on average 10 min. each
• One inspection activity (I) taking 4 minutes to complete.
• X% of the jobs are rejected at inspection and sent for rework

A B C I
0.75
(10) (10) (10) (4)

0.25
➢ What is the average flow time?
a) If no jobs are rejected and sent for rework.
b) If 25% of the jobs need rework but never more than once.
c) If 25% of the jobs need rework but reworked jobs are no different in quality than ordinary jobs.

a. Flow Time = FTA + FTB+ FTC + FTI = 10+ 10+ 10+ 4 = 34 Minutes
b. Flow Time = FTA + (1+r)* {FTB+ FTC + FTI} = 10+ 1.25*{10+ 10+ 4} = 40 Minutes
c. Flow Time = FTA + (FTB+ FTC + FTI}/(1-r) = 10+ {10+ 10+ 4}/(1-0.25) = 42 Minutes

8/28/2023 Prof Kalyana C Chejarla Laguna et al.

 Multiple Paths
• It is common that there are alternative routes through the process
• For example: jobs can be split in “fast track” and normal jobs

• Assume that m different paths originate from a decision point

• pi = The probability that a job is routed to path i
• Ti = The time to go down path i

m
FT = p1T1+p2T2+…+pmTm=  pi Ti
i =1

8/28/2023 Prof Kalyana C Chejarla Laguna et al.

 Multiple Paths - Example
• Consider a process segment consisting of 3 activities A, B & C with
activity times 10,15 & 20 minutes respectively
• On average 20% of the jobs are routed via B and 80% go straight to
activity C.
A 0.8 C
(10) (20)

0.2
B
(15)

➢ What is the average flow time? If there was another process B1 (10
minutes) on the 80% line, before
Flow Time = FTA + PB*FTB+FTC
convergence at C?
= 10 + 0.2*15 + 20
= 33 Minutes Flow Time = FTA + (PB*FTB+ PB1*FTB1) + FTC
= 10 + (0.2*15 +0.8*10)+ 20
= 41 Minutes

8/28/2023 Prof Kalyana C Chejarla Laguna et al.

 Processes with Parallel Activities
• If two activities related to the same job are done in parallel the
contribution to the cycle time for the job is the maximum of the two
activity times.
• Assuming
• M process segments in parallel
• Ti = Average process time for process segment i to be completed

FTparallel = Max{T1, T2,…, TM}

• Example: A students admission application in triplicate is sent in

parallel to Dean’s Office, Accounts Section & Admissions committee for
seeking inputs

8/28/2023 Prof Kalyana C Chejarla Laguna et al.

 Parallel Activities - Example
• Consider a process segment with 5 activities A, B, C, D
& E with average activity times: 12, 14, 20, 18 & 15
minutes
B
(14)

A C E
(12) (20) (15)

D
(18)
➢ What is the average flow time for the process segment?

Flow Time = FTA + Max{FTB+FTC+FTD} + FTE

= 12 + 20 + 15
= 47 Minutes

8/28/2023 Prof Kalyana C Chejarla Laguna et al.

Other Resources:
- https://www.tocinstitute.org/
- https://www.youtube.com/watch?v=t_oM9LvK0rU
- Plus many more

Theory of Constraints
Self Study
 Goal of the firm
• Organizations have many purposes
• Provide jobs
• Consume raw materials
• Increase sales
• Increase market share
• Develop technology
• Produce high-quality products

• These do not guarantee the long-term survival of the organization

• The goal of a firm is to make money

8/28/2023 Prof Kalyana C Chejarla Chase

 Goal of the firm Cont’d
• Financial
• Net profit-an absolute measurement in dollars
• Return on investment-a relative measure based on investment
• Cash flow-a survival measurement
• Operational
• Throughput-the rate at which money is generated by the system through sales
• Inventory-all the money that the system has invested in purchasing things it
intends to sell
• Operating expenses-all the money that the system spends to turn inventory into
throughput
• From operations standpoint, the goal of the firm is to increase
throughput while simultaneously reducing inventory and operating
expense

8/28/2023 Prof Kalyana C Chejarla Chase

 Theory of Constraints
Methodology

1. Identify the system’s constraints

2. Determine how to exploit the constraints
– Choose decision/ranking rules for processing jobs in bottleneck
3. Subordinate everything to the decisions in step 2
4. Elevate the constraints to improve performance
– For example, increasing bottleneck capacity through investments in new
equipment or labor
5. If the current constraints are eliminated return to step 1
– Don’t loose momentum, continuous improvement is necessary!

8/28/2023 Prof Kalyana C Chejarla Chase

 Basic Principles of the Theory of Constraints

8/28/2023 Prof Kalyana C Chejarla Collier

 Measuring Process Performance

8/28/2023 Prof Kalyana C Chejarla Chase

 Reflection
• Utilization is the fraction of time a workstation or individual is
busy over the long run. It is difficult to achieve 100% utilization.
Most job shops range from 60-95% with most continuous flow
processes above 95%.
• Throughput is the number of units or tasks that are completed per
unit time from a process.
• Understanding queueing models will help managers improve
processes that eventually save time, money and enhance customer
service.
• The philosophy and principles of the Theory of Constraints (TOC)
are valuable in understanding demand and capacity management.

8/28/2023 Prof Kalyana C Chejarla Collier

 Reflection Cont’d

• Utilization • Theories of constraints (TOC)

• Throughput • Constraint
• Bottleneck • Physical Constraint
• Flow time (cycle time) • Nonbottleneck (NBN) work
• Queue activity
• Queueing System • Nonphysical Constraint
• Queueing Theory
• Fixed-time simulation
model

8/28/2023 Prof Kalyana C Chejarla Collier

Thank You